Can the bank force a client to take out insurance with the mortgage?
Banks often require bonding to be able to contract mortgages with the most advantageous conditions. Although the new mortgage law, passed last June has brought changes in this regard. This regulation places limits on the so-called “linked products” of mortgages, or what is the same, to take out insurance, pension plans and any other additional product that entities use to reduce the interest on their loans. Or simply to allow hiring
Among the required financing products, insurance stands out. In fact, contracting home and life insurance with your entity is an essential requirement to access a bonus on your mortgage in 73% of the offers at a variable rate, according to Kelisto data. So that you understand the characteristics of these insurances, including what their small print hides, in Kelisto we have selected the most frequent doubts. And we have given them an answer so that you know what to expect before you take out insurance with the mortgage.
What are linked products?
With the law in hand, banks cannot force you to hire any related products. That is, no financial product that goes within the same pack as the loan itself. Of course, they can offer it separately and as a condition, so that you get a bonus on the interest you are going to pay. What usually happens.
However, the new mortgage law establishes two exceptions in which the linking of products is allowed:
May these bring a clear benefit to the client. ”
That it is a policy to guarantee that you can pay off your debt. As could happen with fire insurance or life insurance. However, in this case, the bank will have the obligation to accept a policy that you offer as an alternative. But you must show that the conditions and benefits are the same as the one proposed by the entity. Accepting your proposal can never make the bank worsen the conditions of your mortgage.
It is important that you keep in mind that hiring home insurance is a requirement that the law imposes on banks so that they can securitize mortgages. That is, issue a series of products (such as mortgage certificates) that are sold in the markets and that allow the bank to obtain liquidity. Therefore, you will not be able to get rid of your hiring.
If you don’t take out insurance, what does the bank offer me?
The mortgage differential will increase if the client does not agree to contract the related products offered by his bank. Whether they are insurance, pension plans, cards … However, there are mortgages that do not require you to be linked in the market. Especially those of entities that operate exclusively online.
In any case, keep in mind that, apart from the two exceptions we mentioned before, no bank can force you to hire anything. If you do not want to buy the products they offer, all they can do is raise interest. In addition, these extras can never be part of the same package as your mortgage. You will always have to present them separately so you can choose whether or not you are interested.
Should I take out a Financed Single Premium insurance?
The Single Financed Premium (PUF) is a financial product characterized in that, instead of having a periodic premium (paid once a year, once a quarter …), as usual, the insurance has only one premium, which would have to pay at once. The trick is that the bank includes that premium in the total amount of the mortgage, which causes you to also pay interest on it. That is, if you ask for a mortgage of 150,000 euros and insurance of 6,000 euros with PUF, the amount for which you will pay interest will not be 150,000 euros, but 156,000 euros. Therefore, you will end up paying more interest to the bank than you would pay with insurance to be paid in the traditional way.
Why does the bank require me to be the first beneficiary of my life insurance?
Many banks demand to be the beneficiaries of life insurance that they ask you to acquire to get a cheaper mortgage, but is it profitable to take out life insurance with the mortgage? In reality, the objective pursued by the financial institution is that the debt the client has with the bank is compensated if the borrower dies. Although including the bank as the first beneficiary is not a problem, you should make sure that the contract specifies that the entity will only benefit from the amount that remains to be paid. Not of all the compensation, in case it was superior.
Is fire insurance the same as multi-risk insurance?
No, fire insurance (which is what the law requires when a bank is going to securitize a mortgage) only includes that coverage. While the multi-risk insurance covers what is called the continent (housing structure) and the content (goods, furniture and equipment that the house contains). They also include Civil Liability to third parties as basic coverage, although there are companies that extend this guarantee to other areas, such as family, work or even that which may be required of pets.
Most banks offer multi-risk home insurance as a linked mortgage product. Even in independent insurers it is difficult to find insurance that only covers fire.
